[🇵🇰] SBP rate cut shows its confidence over recent economic stability

[Ghazi52]

Source : https://www.dawn.com/news/1858657

SBP rate cut shows its confidence over recent economic stability​

Editorial
September 13, 2024

CONTINUING ongoing monetary easing, the State Bank has slashed its key policy rate by 200bps from 19.5pc to 17.5pc for the third time since June. Cumulatively, the bank has sliced the interest rates by 450bps from the decade-high of 22pc in three months.

The fresh reduction in the borrowing costs shows the central bank’s confidence over recent economic stability amid hopes that the IMF Board would approve the new loan programme by the end of this month. The rate cut was widely anticipated amid a sharp drop in headline inflation to a single digit in August, and growth in the delta between the current CPI reading and the SBP’s policy rate to 10 percentage points.

The surprise in the policy decision was the quantum of the rate reduction. The bank said its decision was informed by the sharp fall in both headline and core inflation. The faster disinflation, resulting from a delay in the implementation of the planned increase in the administered domestic energy prices, as well as the decline in global oil and food prices has somewhat exceeded SBP expectations.

Additionally, the rate cut is driven by a sharp fall in global oil prices despite market volatility, stable SBP forex reserves at around $9.5bn in spite of weak official inflows and continued debt repayments, and improvement in inflation expectations and business confidence. Still, the quantum of the latest rate cut is believed to have been dictated by a large decline in the secondary market yields of government securities.

While there is no uncertainty about continued monetary easing over the next few reviews, experts are divided on the extent of future rate cuts and the pace at which these should be done. The delta between inflation and policy rate suggests another couple of sharp rate cuts in November and December. But if future monetary policy is to continue focusing on maintaining positive real interest rates to lower inflation to the 5pc-7pc target by the end of next September and ensure macroeconomic stability, the pace of future rate cuts would have to be slowed down.

 

[Lulldapull]

I was watching Shabbar Zaidis show and he said that the imf package will come across and things should stabilize gradually.

One of the biggest contributors to our stability is the cheap as chips oil n gas from Iran were smuggling like there ain’t no tomorrow.

Irans saved our ass by opening the tap.

GCC can go fukk themselves. They were sucking up 60% of our measly budget from USD denominated crude/ LNG purchases.

 

[Ghazi52]

I was watching Shabbar Zaidis show and he said that the imf package will come across and things should stabilize gradually.

One of the biggest contributors to our stability is the cheap as chips oil n gas from Iran were smuggling like there ain’t no tomorrow.

Irans saved our ass by opening the tap.

GCC can go fukk themselves. They were sucking up 60% of our measly budget from USD denominated crude/ LNG purchases.

Very much true .

 

[Lulldapull]

Very much true .

We need to keep on doing things in our interests. I will support anyone who comes to power and works for our interests.

We need to ramp up regional trade and slowly wean ourselves off the USD.

It's the only insurance against big power manipulation and blackmail.

 

[Ghazi52]